Introduction
Understanding percentage gain is key if you're investing in India and trying to track your portfolio's performance. Whether you’re investing in stocks, mutual funds, or gold, this simple yet powerful metric helps you assess how much your investment has grown from its original cost. Given what you spend on it, understanding percentage gain is essential in determining your investment's worth. Percentage gain gives you a number to show how much an investment is worth compared to its previous value, presented as a percentage. In this blog post, we will discuss percentage gain, the formula, how to calculate, and other insights that will help you use your knowledge in your investing journey.
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What is Percentage gain?
Say you bought a share in a company listed on the BSE and paid ₹500. A year later, it is worth ₹600. The increase in value is your profit, but how do you say how far it has grown from its previous value? This is where percentage gain is helpful. Percentage gain gives you the relative growth based on what you paid, and allows you to compare different investments, whether stocks, mutual funds, or fixed deposits.
Percentage gain is especially valuable because it gives your perspective on your returns. A ₹100 gain on a ₹500 investment is much larger than a ₹100 gain on a ₹5,000 investment. By calculating your percentage gain, you can assess which investments are good performers despite their size.
The Percentage Gain Formula
Understanding how to calculate percentage gains is necessary to explain the percentage gain formula:
Percentage Gain = [(Final Value – Initial Value) ÷ Initial Value] × 100
Here's what each term means:
Final Value: The current or selling price of your investment.
Initial Value: The price you paid when you bought the investment.
The outcome is expressed as a percentage, which makes it easy to visualise how your investment increased in value.
How to Find Gain Percentage: A Step-by-Step Guide
Now let's explore how to calculate gain percentage by using an example. Suppose you invested ₹ 10,000 in a mutual fund, which has increased to ₹ 12,500 after a year. Follow the steps below to calculate the gain percentage:
Identify the values:
Initial Value = ₹10,000
Final Value = ₹12,500
Calculate the gain:
Gain = Final Value - Initial Value = ₹12,500 - ₹10,000 = ₹2,500
Apply the percentage gain formula:
Percentage Gain = (Gain / Initial Value) × 100
Percentage Gain = (₹2,500 / ₹10,000) × 100 = 25%
Hence, your mutual fund investment has a 25% percentage gain. This indicates that your investment increased by a quarter of its original value over one year.
Why Percentage Gain is Important to Indian Investors
Within the Indian dominion of investing options (from fixed deposits to fluid stock markets such as NSE and BSE), percentage gain shows your investment performance across a wide span of assets. For instance, if your fixed deposit earns a 6% return annually, but your stock portfolio shows a 15% percentage gain, you can quickly see which investment is working harder for you.
It's also handy when evaluating sectoral mutual funds or small-cap stocks, popular among Indian investors. Calculating percentage gain lets you decide whether to keep a stock like Reliance Industries or move to a high-flying IT stock like Infosys.
Considerations
While percentage gain can be helpful, it has limitations and must be considered carefully. It does not consider the time taken to arrive at that gain. For example, a 20% gain over 1 year is better than a 20% gain over 5 years. In this regard, you can look at other measures such as Compound Annual Growth Rate (CAGR) for time-adjusted returns.
Also, percentage gain does not consider inflation, tax and transaction costs, which you should not ignore when investing in stocks in India. For example, short-term capital gains on equities (stocks) held for less than a year are taxed at 15%. These factors should always be on your radar when you evaluate your returns.
Conclusion
Realising your percentage gain will help you to make better investment decisions. To appropriately measure the performance of your portfolio, you should understand how to calculate percentage gain and find gain percentage. With this understanding, you can decide whether to invest in the Indian stock market, mutual funds or even gold. Whatever the investment may be, this is the one metric that can be used to measure your success. Get started applying this method today to know how your net worth is growing.